IBM is asking investors to view calendar Q2's software wobble as merely a temporary AI-induced panic attack, insisting the delayed deals that triggered one of its steepest stock slides in years are already starting to return. Just over a week after its preliminary results sent stock tumbling, Big Blue devoted much of its earnings call to arguing that nothing fundamental had changed. Customers hadn't abandoned software, executives insisted; they'd simply emptied their wallets on servers, storage, and memory first. "The majority of what didn't happen in the second quarter was large capex deals at large clients," IBM CEO Arvind Krishna said. "We have been very pleased to see that about a third of those have already closed." Krishna stopped short of declaring victory, adding: "The fact that a third have already closed in the first three weeks [of this new quarter] gives us an indication, not yet full evidence, but a good indication that this was deferral and not destruction." It was an argument IBM badly needed investors to accept after last week's market reaction suggested plenty already feared those software dollars weren't coming back. Wall Street, however, wasn't quite ready to chalk it all up to bad timing, with much of the Q&A focusing on whether customers had postponed software purchases or fundamentally changed spending priorities. "The biggest debate everyone has since the pre-announcement has been, is this demand deferred or destroyed for IBM?" Evercore's Amit Daryanani asked. Krishna stuck to the company's line that enterprise customers had temporarily diverted spending toward AI infrastructure, not away from software altogether. Having spent the first half of the call insisting AI hadn't permanently dented its software business, IBM spent the second explaining how AI could become its next multibillion-dollar software opportunity instead. "The unprecedented investment in AI infrastructure and models will increase pressure on enterprises to generate meaningful returns from that spend," Krishna said. "Value will increasingly shift towards the orchestration and data layers." That thinking also underpins Project Lightwell, IBM's new service aimed at enterprises drowning under aging open source software. Krishna argued that the release of Anthropic's Mythos earlier this year had dramatically accelerated AI-assisted vulnerability discovery across legacy codebases. "The Mythos release in early April has accelerated the discovery of security vulnerabilities for clients," he said, describing the opportunity as "a multibillion-dollar" total addressable market. IBM says Lightwell uses AI to remediate and validate open source packages that enterprises still rely on long after community maintainers have moved on. Customers can subscribe for $1 million per year, and Krishna said early adopters already include Bank of America, Citi, Goldman Sachs, JPMorgan Chase, Mastercard, Morgan Stanley, Visa, and Wells Fargo. "We believe that this is a multiple billion-dollar opportunity, which we're going to go after really fast and hard, leveraging expertise in AI and open source both," Krishna said. So while IBM spent much of the call insisting there was nothing fundamentally wrong with its software business, it also made clear where it thinks the next pot of gold lies: selling enterprises AI to clean up the security mess that another AI is helping to uncover. ®
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